Brazil: Bolsonaro Battles to Privatize Major Electric Utility Eletrobras

New president Jair Bolsonaro is seeking the privatize some parts of Brazil's major state-owned electric company Eletrobras.

The Bolsonaro administration has promoted privatization of state enterprises (Flickr).

Sao Paulo, March 28 (EFE). – State-owned Eletrobras, Brazil’s largest electric utility, which is in the process of being privatized, reversed its 2017 losses and made a net profit of 13.3 billion reais (about USD $3.4 billion dollars) last year, the company reported Thursday.

The result was the company’s best performance in the last 20 years, and was driven by the reduction of onerous contracts with the Angra III nuclear power plant (Angra dos Reis, Rio de Janeiro), and by the sale of some of its energy distributors that were running up deficits, among other factors, Eletrobras said in a statement.

Just in the fourth quarter of 2018, earnings were 12.1 billion reais (USD $3.1 billion dollars) compared to losses of 4 billion reais (USD $1 billion) in the same period of 2017.

The state company thus reversed the losses of 1.7 billion reais (about USD $435 million) that it registered in 2017.

The gross operating profit (Ebitda) reached 202 billion reals (USD $5.1 billion) in 2018, which represents an increase of 158% compared to the previous year.

However, net income decreased by 15% in the annual comparison, from 29.4 billion reais (USD $7.4 billion) to 25 billion reais (USD $6.3 billion).

Eletrobras investments showed a 12% drop in one year and stood at 4.6 billion reais (USD $1.2 billion) in 2018.

Net debt closed last December at 26.1 billion reais (USD $6.6 billion), 28.6% more than in the same month of 2017.

Eletrobras is in the middle of a tortuous process of privatization promoted during the government of former President Michel Temer (2016-2018), within the framework of a plan to sell state assets in order to reduce the large fiscal deficit.

At the time the Temer administration then assessed Eletrobras at 12.2 billion reals (USD $3.1 billion) and included that figure in the revenue heading of the budget for 2019.

However, the new administration of Jair Bolsonaro, in power since last January 1, has been forced to withdraw that figure from the budget forecast for the sake of prudence, because it is possible that the sale of the electric company will not materialize this year.

The privatization of the company has been paralyzed several times by the Justice Department, over strategic concerns, although in 2018 the government managed to put six of its major distributors into the hands of the private sector.

Temer, who originally proposed the privatization in the first place, faced Congressional disapproval, and was ultimately unable to sell the state asset.

Bolsonaro’s top economic adviser, University of Chicago-trained Paulo Guedes, has taken different approaches with regard to selling various parts of Eletrobras business: “Transmission, that’s very difficult, but in the case of generation there are cases where I would sell and others where I wouldn’t…there are many cases of strong private generation.”

Bolsonaro’s public statements have generally favored privatization of transmission and distribution of energy, but not the generation itself.

Brazil’s stock market has skyrocketed in the wake of Bolsonaro’s market-friendly policies and reforms, but Brazil still faces serious economic challenges as it seeks to rebound from a serious crisis, during which former president Dilma Rousseff was impeached from office, leaving the hapless Michel Temer as her lameduck successor.

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